CANADA FX DEBT-C$ nears 3-month high on NAFTA trade deal prospects

(New throughout, updates prices and market activity, adds
strategist comments)
* Canadian dollar at C$1.2935, or 77.31 U.S. cents
* Loonie touches its strongest since June 6 at C$1.2887
* Bond prices lower across steeper yield curve
By Fergal Smith
TORONTO, Aug 28 (Reuters) - The Canadian dollar strengthened
to a nearly three-month high against its U.S. counterpart on
Tuesday as investors bet that Canada will reach a deal with the
United States and Mexico to overhaul the North American Free
Trade Agreement.
Canada's top trade negotiator is joining her Mexican and
U.S. counterparts in Washington in a bid to remain part of a
revamped trilateral North American trade pact, as U.S. officials
expressed optimism a deal could be reached this week.
"The market is signaling that a deal is at hand," said Adam
Button, currency analyst at ForexLive. "Canada has been strong
armed into an agreement but at the end of the day a deal is
better than no deal."
Canada sends about 75 percent of its exports to the United
States so its economy could benefit if talks with the United
States and Mexico lead to a trilateral trade deal.
At 3:33 p.m. (1933 GMT), the Canadian dollar was
trading 0.2 percent higher at C$1.2935 to the greenback, or
77.31 U.S. cents. The currency touched its strongest since June
6 at C$1.2887.
The price of oil, one of Canada's major exports, fell as
some investors took profits on recent strong gains. U.S. crude
oil futures settled 0.5 percent lower at $68.53 a barrel.
Canadian government bond prices were lower across a steeper
yield curve, with the two-year down 1 Canadian cent
to yield 2.145 percent and the 10-year falling 16
Canadian cents to yield 2.316 percent.
Canada's gross domestic product data for the second quarter
is due on Thursday.
(Reporting by Fergal Smith
Editing by Susan Thomas and David Gregorio)